Last October, on the day after the Dow Jones Industrial Average climbed above 10,000 for the first time since the economy had collapsed a year before, Timothy Geithner appeared at a conference put on by The Economist, deep in Manhattan’s financial district. Geithner was then, and remains, an enormously disputed figure for his central role in shaping the government’s response to the crisis, first as president of the New York Federal Reserve Bank and now as President Obama’s Treasury secretary. In some quarters of Washington, he is viewed as a fully housebroken abettor of Wall Street, the man who, from his perch at the Fed, conspired with Henry Paulson, the previous Treasury secretary and former chairman of Goldman Sachs, to sluice trillions of taxpayers’ dollars to what were once called “the malefactors of great wealth.” In Congress, Geithner is the rare subject on which some Republicans and Democrats can manage to agree: they agree he should resign. Since Geithner’s disastrous public debut in February 2009 with a speech outlining the White House’s plan to stop the crisis—the market responded by dropping 382 points—bashing him has become the preferred means of registering one’s outrage about the economy without actually committing to a course of action.
I’d arranged on short notice to join him in New York because I’d assumed, in a spectacular misjudgment, that an audience of financiers and the validation of Dow 10,000 would cast him in a different, more triumphant light. The event took place in a moodily lit subterranean auditorium that pulsed with the kind of understated techno music one associates with designer vodkas and business-class air travel. The audience was upper-middle-class Manhattan finance: hedge-fund employees, bankers and lawyers, a smattering of business students—people who don’t sit on panels or own jets but aspire to someday. Geithner was interviewed by the magazine’s editor. Pivoting off the day’s good news, Geithner said the government had “put in place the conditions and the foundation for a resumption of growth and recovery” and emphasized, a bit more forcefully than he does in Washington, just how much money it had poured into the financial system to support that objective. It was “hugely important,” he added, and a focus of government policy, that there be no “headwinds or constraints on growth going forward.” He distilled the strategy into two words: “First, growth.”
Video: Joshua Green explains the secret of Geithner’s success
Eventually, he came to the issue of fixing the system. Asked to respond to a Treasury official’s declaration that absent meaningful reform, government intervention on behalf of banks will have worsened the problem, he readily agreed: “Absolutely correct.” He spoke for a moment about the need to constrain risk-taking in order to avoid ever again placing such an “untenable cost on the taxpayer,” and then he steered back onto friendlier terrain, reaffirming his opposition to limitations on bankers’ pay. But he’d touched a nerve. During the Q&A period that followed, the market’s rise went unhailed. Instead, Geithner fielded skeptical inquiries about reform that culminated with a middle-aged man in an expensive suit taking the microphone and insisting, in the tremulous voice of someone struggling to maintain decorum in the face of an outrageous affront, that the government reconsider its plan to regulate hedge funds.
Geithner didn’t fare any better at his next stop, an interview with Maria Bartiromo of CNBC. The network, a notorious cheerleader for the stock market, seemed a cinch to celebrate any Dow milestone. So Bartiromo’s sharp interrogation was jolting. She laced Geithner with questions about whether the Obama administration was “anti-business,” plotting to raise taxes and bullying banks to cut dividend payments, and she even suggested he might be engaging in “class warfare” against the rich. Bartiromo didn’t outright call Geithner an agent of Obama’s socialist agenda, but that was the spirit of the affair. Geithner held firm to the issue of growth, and persevered. Bad as it looked, this was a mere dusting: he’d endured worse. When the cameras stopped rolling, the pair stood up and briskly shook hands, and Geithner headed for the door. Then, suddenly, Bartiromo spun around and called out after him, in a tone that expressed something between self-justification and apology, “I know you have an impossible job!”
The antithetical reactions to Geithner—agent of socialism or lapdog of Wall Street—stem partly from how little is known about him. He lacks the fully realized public persona most government officials develop by the time they’re chosen for important Cabinet positions. He doesn’t look like a Treasury secretary. He lacks presence. He’s trim and small, practically elfin, and, at 48, young for the job (he looks even younger). He doesn’t fit the Treasury secretary’s typical profile, either, since he is neither a businessman nor an economist nor a party eminence serving out a comfortable valedictory. Geithner is something else entirely—a superstar of the bureaucracy, whose rapid rise during the 1990s came in the Treasury Department he now runs. At heart, he’s an institutionalist.
Geithner came of age in Washington just after the Cold War ended, when the country’s preoccupation with wealth and the long bull market made Treasury a nerve center of the government. It helps explain Geithner to think of him as someone whose formative experience was in figuring out how to contain the series of upheavals that swept the international financial community in the 1990s, from Japan to Mexico to Thailand to Indonesia to Russia, and threatened the boom. Toward the end of the Clinton administration, a view emerged that the government had more or less figured out how to manage the global financial system. Those at the helm won extraordinary renown. The era’s time-capsule-worthy artifact is a Time cover touting Alan Greenspan, the Federal Reserve chairman; Robert Rubin, the Treasury secretary; and Lawrence Summers, Rubin’s deputy, as “The Committee to Save the World.” Geithner was an aide de camp.
To outsiders, the Clinton Treasury doesn’t command the awe it once did. Memories of the bull market have been replaced by anger at the financial deregulation Clinton presided over, which precipitated the current crisis. Greenspan’s reputation has been ruined; Rubin’s has suffered as well, for the added sin of pushing his next employer, Citigroup, to make risky bets that nearly sank the firm. But inside the group, things look much different. Its members see themselves as an elite corps, bound by the common experience of having battled the crises of the 1990s and mostly prevailed. They share the belief that a potent combination of speed, force, and nerve—a buccaneering willingness to cast aside doubt, seize the levers of government, and apply its full power—can halt financial panics. They also believe that governments typically do too little to respond, rather than too much, and pay a steep price for it. Applying this formula is what Geithner has been doing in the biggest crisis since the Great Depression. Other Obama officials share this outlook, notably Summers, who now directs the National Economic Council. But the faith runs purest in Geithner.
From Geithner’s perspective, this approach is the surest, cheapest, and least destructive way to save an economy in danger of collapse. But it comes at a cost, which is that it is galling to the public. It requires abstaining from moral judgments and pumping tax dollars into the same institutions that inflicted the pain, as part of an all-hands-on-deck effort to restore economic confidence. This has had the politically deleterious effect on the administration, and especially on Geithner, of appearing to routinely submit to Wall Street. It’s what lies behind the public’s anger, the feeling that some fundamental injustice is being allowed to perpetuate itself—a sentiment that violently upended the Obama agenda in January, when the Massachusetts Republican Scott Brown won the special Senate election to replace Ted Kennedy. Brown’s victory immediately derailed Obama’s signature initiative, health-care reform. But his win was widely interpreted as an expression of anger at the White House for its handling of the economy, and particularly of Wall Street.
The fact that most of the bailouts driving this anger occurred under George W. Bush has been easy to overlook, in part because Geithner is the most visible constant between the two administrations. At every stage, he has been central to the crisis—during the initial response, the design of the recovery plan, and the effort to devise new rules. “During the Bush administration,” Keith Hennessey, a former director of Bush’s National Economic Council, told me, “you basically had three people who were the core in making the policy recommendations to the president and implementing them. And they were Hank Paulson, Ben Bernanke, and Tim Geithner. Now it’s Larry, Ben, and Tim, and Tim has moved chairs. What this means is that two-thirds of the core policy group is unchanged from Bush to Obama. The Obama political and communications operations have always wanted to emphasize just how different and transformative the Obama solutions are, relative to the Bush people who—they claim—left them this enormous problem. The reality is, there is remarkable continuity, from a personnel standpoint and a policy standpoint, in what’s being done.”
That reality has become a liability. Geithner designed Obama’s response to the crisis—a response that, along with the stimulus and the Federal Reserve’s actions, has been cheaper and more effective than many people predicted, though still imperfect. But this success has been obscured, partly by stubborn high unemployment but mostly by the perception that Obama has “put the interests of Wall Street above those of Main Street.” And more than anyone else, Geithner is held to blame.
But to think of Geithner only in the context of Wall Street, rather than Washington and national politics, is to miss a lot of what’s going on. Geithner’s career coincides almost exactly with an important shift in how the Democratic Party thinks about finance, a shift that set off the wave of deregulation and reoriented the institutions he served. Any study of Geithner is unavoidably a study of how both political parties came to agree that the interests of the financial sector must predominate, of what went wrong when those interests did predominate, and of how someone whose glittering career is a product of that system wound up at the center of an effort to write new rules for it. At the center, really, of the whole Obama presidency.
If Geithner were a character in a British period novel, he’d be the diligent son of the head servant, someone whose outstanding qualities are noted by the master and who, when the time comes, is unexpectedly rewarded with passage to university and the world beyond. He makes a deep impression. Almost anyone who has spent time with him can describe his effect on people. A senior Treasury official in the George H. W. Bush administration recounted for me, in vivid detail, 20 years after the fact, a single briefing that Geithner, then still in his 20s, had given him on Japan: “Within the building, Tim was already thought to be a superstar. And in my experience, he was brilliant. Incredibly well prepared, thoughtful. He still talked too fast, even then. But he was so on top of stuff, so impressive professionally, that there was a ‘wow’ factor in dealing with him. You’d hear how good he was, and then you’d deal with him, and then you’d think, ‘Oh my God, the guy really is just better.’” Geithner’s career follows a pattern of his being not necessarily the first, or the most obvious, choice for some important job, getting it anyway, and performing so well that he quickly advances, acquiring a patron in the process. He is the quintessential promising young man. And he has many powerful patrons.
Geithner was born in Brooklyn in 1961, and grew up in a series of far-flung, exotic locales. When he was 1, his father, Peter Geithner, joined the United States Agency for International Development and moved his family—his wife, Deborah, and Tim—to Salisbury, Rhodesia. Peter Geithner came from Columbian Carbon International, a Fortune 500 conglomerate, as part of a Kennedy effort to recruit businessmen into government. The Geithners’ daughter, Sarah, was born in Rhodesia, and twin sons, David and Jonathan, followed two years later, when the family was back in Washington. In 1968, Peter Geithner accepted a position with the Ford Foundation and the family moved again, to New Delhi.
The Geithners took a full-immersion approach to living abroad: Peter Geithner emphasized to me that his family’s social life in India, and later in Thailand, did not revolve around the embassy crowd or fellow foreigners, but rather locals he met through his work. To Tim Geithner, the experience was indelible. “I was living in countries with acute poverty,” he told me, in one of several recent interviews. “I saw from an early age what impact the U.S. could have on the world, for good and for not-so-good. My parents’ friends, from an early stage in life, were in that world—Oxfam, CARE, World Bank, Amnesty International.” To work as a Third World development officer is to witness the limitations of government’s capacity to solve problems on its own. Foundations like those to which his parents and their friends devoted their lives exist to offset these shortcomings. They exert influence obliquely rather than by force. Geithner followed a path very similar to his father’s—up to a point. He majored in government and Asian studies at Dartmouth, then took a graduate degree in international relations, as his father had, from the Johns Hopkins School of Advanced International Studies. His interests likewise tended toward Asia. After graduate school, his father had deferred going into government to gain private-sector experience; so did the son, landing a job in 1985 at Kissinger Associates, the consulting firm founded by Henry Kissinger, Brent Scowcroft, and Lawrence Eagleburger.
For a young man planning a career in the international side of government, this was a stroke of almost unimaginable good fortune. It did not come by chance. Scowcroft had called the dean at Johns Hopkins and asked him to recommend an Asia specialist; he recommended Geithner. Geithner was one of four analysts charged with covering the globe. He wrote memos on political and economic developments in China, Japan, and Southeast Asia, and then flew to New York to brief the firm’s high-powered principals. Kissinger took note of his young charge. Geithner was asked to write a series of longer papers, not for the firm but for Kissinger personally, and they became part of the basis for Diplomacy, Kissinger’s sweeping history of international statecraft. Although Geithner moved on to the government after three years, Kissinger remains an enthusiastic backer.
Geithner came to Treasury as a civil servant in 1988. After a year in the trade office, he moved over to the Office of the Assistant Secretary for International Affairs, which was known as OASIA (pronounced “Oh-asia”). At the time, OASIA had a reputation as a rich-in-tradition, upper-echelon bureaucracy with an experienced career staff, much like USAID. The institutional culture was proudly nonideological, eastern-establishment, consensus-driven, business-friendly, and consciously apart from the crude partisanship of Capitol Hill. Geithner was sent to Tokyo as assistant Treasury attaché in the U.S. Embassy in the spring of 1990, arriving just after the Japanese real-estate bubble burst and the Nikkei index began its dizzying fall—the beginning of Japan’s “lost decade” of deflation and stagnation. The United States’ role was that of the stern parent, urging Japan to confront the reality that its banks were paralyzed by bad loans. The Japanese government was loath to recognize the problem, preferring to wait in hopes that its banking system would heal itself. This strategy of denial necessitated lots of diplomatic feints and thrusts, and part of Geithner’s brief was keeping abreast of the recondite details and knowing their possible second- and third-order effects. For the most part, the U.S. pressure failed. But working on the problem was enlightening. “You learn much more about a country when things fall apart,” Geithner says. “When the tide recedes, you get to see all the stuff it leaves behind.”
The Japanese experience underscored the limits of moral suasion and the dangers of taking a gradualist approach to a banking crisis. It would be eight years before the Japanese government began to fortify its banks with public capital, and Japan still has not fully recovered. “These were very capable people,” Geithner told me. “They were making a completely conscious choice that they were going to take this strategy, even though it was going to be costly in terms of growth forgone.”
Geithner returned to Washington and OASIA in 1992, intending to stick around long enough to help a new boss settle in and then pursue a different job within Treasury’s civil service. The incoming undersecretary for international affairs was Lawrence Summers, the brilliant, prickly Harvard economist entering government for the first time. Geithner had never heard of Summers, but agreed to stay on temporarily as a special assistant. He never left.
The pair fast developed a symbiotic relationship. Geithner had the rare capacity to withstand Summers’s intellectual bullying and thrive, giving back as good as he got. Summers found that Geithner possessed an uncanny feel for how power functions in a bureaucracy, and could guide him in the foreign culture of the government. (Geithner’s Secret Service code name as Treasury secretary is “Fencing Master.”) His colleagues rave, as Summers did to me, about how Geithner is always armed with a plan: “Most people, when you ask, ‘What should I do about X?,’ will give you a list of considerations. Tim always gave you a strategy.” The partnership was the more striking to behold for the temperamental and physical differences between the two men: Summers, the brash, slovenly academic, and Geithner, his lithe and savvy aide.
Geithner has the schoolboy qualities of being hardworking, exact, and deeply loyal to those above and below him. But there’s something else there, too. The image of him that coalesced in the early weeks of the Obama administration—awkward, halting, out of his depth, mocked on Saturday Night Live—is precisely the opposite of the view held by those who have known him, a view that is remarkably consistent. In the course of many interviews about Geithner, two qualities came up again and again. The first was his extraordinary quickness of mind and talent for elucidating whatever issue was the preoccupying concern of the moment. Second was his athleticism. Unprompted by me, friends and colleagues extolled his skill and grace at windsurfing, tennis, basketball, running, snowboarding, and softball (specifying his prowess at shortstop and in center field, as well as at the plate). He inspires an adolescent awe in male colleagues.